House buyer will stay for 5 years WITHOUT any mortgage monthly installment.

At the end of 5th year, house buyer need to make decisions
a. refinance and assume the balance 80%
b. sold the house and split the sale value between the buyer, crowdfunder and developer.

For crowdfunding investor, he/she will make 5%/annum during the 5yrs tenure.

I am old school, if you can’t afford a 20% down payment and service the 80% loan, then stay with ur parent or rent until u can afford to do so! I.e do not live beyond ur means.

This scheme may encourage 5% cash down payment and borrow the rest of 15% (I am sure some bank will see a loophole and exploit it) hence a potential case of overleveraging.

Note the claim preference, that institutional investors (2019 open to public) has first claim and not the buyer. Also “If the Buyer elects to stay on, he can refinance the property via FundMyHome. He may need to top up some funds to sustain a 20% share of the new valuation” https://fundmyhome.zendesk.com/hc/en-us/articles/360019045391-What-are-the-steps-in-the-exit-process- err, from the buyer point of view, I own 20% share “5year ago” why need to top up MY OWN SHARE! Bad clause to buyer (another derivative scheme against the buyer)

From a commercial point of view (maybe 5 year later) is u got ur 20% house but too bad u sign on the dotted line (like HDB flats with 99 year lease n Sg Politicians in yester years claim it is a appreciating asset until today where they now warned that its is zero when lease expires). Too bad that gov’t of today’s may be encouraging such scheme for later Govt to answer.

There is a lot of options (I.e derivatives) involved, for e.g buyers option to sell or “elects to stay on”and top up if necessaryhsee above). It’s difficult to elaborate further as Warren Buffet stated that derivatives are “financial weapons of mass destruction”, at least for the general layman. Additionally, if buyer is over leveraged(as above), not sure whether he/she can afford the 5% rental yield that he/she has to pay going forward, https://fundmyhome.zendesk.com/hc/en-us/articles/360019045391-What-are-the-steps-in-the-exit-process- . So an investor may end up with a “perpetual bond of 5% yield” (and credit risk to boot) at the end of 5 years henceforth. I.e no capital payment unless so decided by buyer to sell which could be forever despite property prices should go up in a “forever scenario”.

My take, sigh, when it is open to non-institutional investors, more clarity is need before I invest in such Govt sponsored scheme. I hope there will be some public forum to engage LGE and his non-salary assistants (like Tony Pua) before this is implemented.

@racingcar
Do you know that this property crowdfunding idea came from a property developer?
Haha....when you read between the line and you shall see who has whose interest.....

I have my suspicions, but to forumers especially layman readers and such reading between the line may not be apparent to them. Hence the implications is more important to such readers than why such idea come about

Nice article, tbh, I think this scheme really benefits more for the banks (who lowered their risk by only lending the 15%) and the developer.

Just would like to comment abit on the perpetual bond of 5% yield.

If this had gone big in the future, it may open up a secondary market where the investor could sell their share of the property. And since a new funding is required either via bank or FundMyHome after the 5 years tenor, investors should be able to re-obtain their capital + the appreciation, if any, unless the investor plan to re-invest into the same house. Of course, there may also be losses due to external factors or simply the buyer didn't take care of the house.

Actually, as they coming out with all these financing schemes and encouraging people to take debts and buy home, I'm more worried of the bubble :/.